HOLLYWOOD, Fla. ( TheStreet ) -- Barrick Gold ( ABX) is proving itself to be the leader among miners when it comes to striking the balance between overcoming rising costs and taking advantage of soaring gold prices.

The company recently reported a killer fourth quarter. The company earned 95 cents a share, declared a 12 cent dividend, posted $2.95 billion in revenue, produced 1.7 million ounces of gold for $486 an ounce, (or $326 if you factor in by-products) and grew measured and indicated resources by 24%.Shares have soared almost 6% since the company reported earnings February 17th.

Barrick chief executive officer Aaron Regent sat down wtih TheStreet during this week's BMO Capital Markets Global Metals and Mining conference here to talk about the headwinds facing the industry in 2011 and his company's strategy for continuing to deliver growth.
Barrick Gold CEO Aaron Regent

The biggest hurdle for the gold industry right now is rising costs as inflation heats up. Most companies are seeing it in higher labor and energy expenditures. Barrick is no exception, but it's how it's managing high costs that counts.

Cash costs are expected to be about 10% higher for the company in 2011 at $450-$480 an ounce. Barrick's total costs, that is, factoring in all the company's expenses not just those associated with production, are $750-$800. The industry average is between $900 and $1,050 an ounce.

In terms of labor costs, there are limited actions a gold miner can take aside from firing people, hiring less qualified individuals or shutting down mines, none of which Barrick is planning to do. Of its overall cost increase of 10%, labor costs make up 5%.

Labor is "a tough one," said Regent. "It's a struggle and there are limitations to what you can do." Labor becomes a particularly difficult issue when it comes to dealing with unions in countries like Argentina, where inflation is 20%. Experts in the mining industry are also in short supply, causing a spike in wages as the leading companies compete for top talent.

Barrick is hoping to offset these non-negotiable costs by bringing lower cost mines on stream. Cortez, for example, in North America, produced 1.1 million ounces of gold in 2010 for under $300 an ounce. Regent expects the mine to produce 1.3 million to 1.4 million ounces in 2011 for under $300. "That'll help pull down our overall costs."

Regent also sites Puebla Viejo and Pascua-Lama as other mines which could offset rising operating costs. Puebla Vieja should ramp up in 2012-2013 and be a 1.1 million ounce gold producer with cash costs below $300 an ounce. The project has 23.7 million ounces of gold reserves. Barrick owns 60%, while other top gold miner, Goldcorp ( GG) owns the rest.

Regent estimates that the Pascua-Lama project can produce 750,000 to 800,000 ounces of gold for the first 5 years for $20-$50 an ounce. The project has proven and probable reserves of 17.8 million ounces of gold and 671 million ounces of silver, which results in these extremely low cash costs. The Pascua-Lama project alone as the ability to reduce overall cash costs by 10%.

The remaining 5% of cost increases for 2011 will be due to higher energy prices. There it seems Barrick is well ahead of the curve.

"We have an energy division within Barrick which produces about half of the requirements," says Regent. "Then we have financial contracts for the balance." Barrick is effectively hedged on oil at $85 a barrel.

In its Veladero mine in Argentina, Barrick uses a wind turbine, which at 4,500 meters is the highest in the world. The company is also constructing a wind farm in Chile for its Pascua-Lama project. "So we do have a strategy of trying to use renewables as much as we can to reduce our environmental footprint"

Barrick is also considering switching its Dominican Republic projects from heavy fuel oil to natural gas or coal, but it looks like Regent favors natural gas.

Rising cash costs are a serious problem in the gold industry, but Barrick seems well equipped to weather the storm. Three low cost projects combined with abandoning fuel or hedging it are helping the company get the most bang for their gold buck as it rushes towards the goal of producing 9 million ounces of gold a year in 5 years.

Barrick certainly isn't the only one taking these steps, and Regent acknowledged that things are never perfect, but the company's cost saving moves added to its dynamite quarter, make Barrick one to watch.

TheStreet Ratings has buy rating on Barrick Gold stock with a price target of $61.26.

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-- Written by Alix Steel in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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